Assume a Scandal

Some people see a routine bureaucracy doing its job. Rep. Darrell Issa sees a scandal.

U.S. Rep. Darrell Issa, R-Calif., at a House judiciary committee in May.

Photo by Alex Wong/Getty Images

Before their summer recess began, House Republicans got a booklet full of advice. Suggestion No. 1: Go fishing for more IRS scandals. “Invite local 501(c)3 and 501(c)4 group leaders to your district office to hear stories of how they could have been targeted by the IRS,” advised party leaders. “Hold a press conference.”

The none-too-subtle message was that the furor over the IRS’s nosy letters to political groups—mostly conservative groups—was not phony. Republicans would pursue any lead of any kind, anywhere. And yesterday, they claimed to have found another lead at the offices of the Federal Election Commission. The House’s own investigations had turned up emails from FEC staffers to the IRS’s tax exemption division—run by Lois Lerner, the Darth Vader of the scandal—asking for current exemption info on 501(c)3s called the American Future Fund and the American Principles Project. In an interview with CNN, outgoing Republican FEC Commissioner Donald McGahn called this “probably out of the ordinary.”

Darrell Issa heard his cue. The chairman of the House oversight committee sent a letter to FEC Chair Ellen Weintraub—a Democratic appointee—wondering whether the FEC-IRS emails might “indicate some coordination.” Based on that, the FEC had two weeks to scour and copy its records for “all documents and communications between or among any FEC official or employee and any IRS official or employee for the period January 1, 2008 to the present.”

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Issa was going fishing, but fishing for what? The allegation here is that the FEC’s counsel might have asked not just for the tax-exempt status of a group—that’s public information—but for something private. The IRS then might have responded with private information, though the emails released thus far don’t indicate that. Weintraub has said she’s “not aware of requesting or receiving any confidential taxpayer information,” and while flank-covering statements from public officials don’t have a 100 percent record of accuracy, Weintraub has also requested that the FEC’s inspector general conduct an “impartial, independent review” of the scandal charge. She announced this a day before the Issa letter; for some reason, Issa’s play got more media attention.

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This level of scrutiny, with this much evidence, is a puzzle to some former FEC commissioners. “From what I've seen so far this doesn't look like anything,” said Larry Noble, a Democratic appointee until 2000 who now advocates for public funding of elections. “It looked like what happened was that the staff contacted the IRS and asked for what was public. When I was there, certainly, it was always clear that the IRS would not give out anything that was not public. The IRS has a list of c3 groups, but it's often out of date, so people check with the source. This looked like a routine inquiry for public information.”

Bradley Smith, a Republican FEC commissioner from 2000 to 2005, was nearly as skeptical as Noble. “I don’t think these emails are damning in any great way,” he said, “but they do raise a question. That’s whether the staff at the FEC can be legally, lawfully making these kinds of inquiries without commission approval. Leaving that aside, I don't think anything that's emerged so far is damning as regards the larger IRS scandal.”

Whether the staff is allowed to answer requests from other agencies—that’s a much smaller question. Unless you’re a real FEC wonk, you might wonder what makes this fishy at all. The answer is in the FEC’s current rules, and in a push by Republicans (like McGahn) who want to tighten them.

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The rules are already tighter than campaign finance reformers would like them to be. To conduct an investigation, technically, a majority of FEC commissioners, split equally between Republicans and Democrats, have to agree that there’s a “reason to believe” (RTB) it’s worth doing. Republicans have fought to enforce that and prevent more independent staff investigations. “Congress did not intend for the Commission to conduct an investigation before finding RTB,” wrote McGahn in a July memo, before a meeting to discuss possible rule changes.

The rules weren’t changed, but the same day McGahn published that memo, he published two enforcement actions chiding recent investigations into Rick Santorum’s presidential campaign and into a 501(c)4 called the American Issues Project. The AIP investigation had started during the 2008 campaign—AIP’s most famous for the 11th-hour ads it ran reminding voters about Jeremiah Wright’s ties to Barack Obama—and dragged on. After the Citizens United decision invalidated the original complaint, the FEC took another tack, looking at whether AIP’s political spending during the election was above and beyond that of a “social welfare” group expected to spend some money on “education.” In his judgment, McGahn accused his peers of “manipulating the timeline to reach the conclusion that AIP is a political committee.”

If you’re a campaign finance reformer on the left, this reads as surreal. It’s an open secret that 501s skirt the “education” requirement, and keep their tax status, by classifying some of their ads as educational. If you’re a conservative, it reads as classic “conservative targeting” and harassment, enabled by the decision to study the calendar-year spending instead of spending through the election cycle. That’s how Wall Street Journal columnist Kimberley Strassel covered the “fishy” story on Aug. 1, reporting that “the FEC staff, as part of an extraordinary campaign to bring down AIP and other 501(c)(4) groups, reache[d] out to Lois Lerner, the woman overseeing IRS targeting,” acting on the Obama campaign’s “vendetta against a political opponent.” Three days later, the paper editorialized that the FEC “used their enforcement power as an anti-conservative sword.”

This is how a fairly complicated story of bent rules, deadlocked regulators, and enforcement memos became a very simple scandal. Lois Lerner worked for the FEC counsel’s office; Lerner then went to the IRS’s tax exemption office. Until proven otherwise, it can be assumed—as National Review assumed—that Lerner disobeyed “Rule 6103, which prohibits the IRS from sharing confidential taxpayer information.” As the tax policy journalist David Cay Johnson has pointed out, the info requested by the FEC in the exchange with Lerner was already supposed to be public.

The scandal will burn anyway. Maybe a bowel-deep investigation of the FEC will find political collusion; likely, it won’t. But it will find evidence that FEC staffers are running questions when Congress has told them not to. That elevates the internal dispute inside the FEC to a controversy that will outlast Donald McGahn. The drip-drip of stories about Congress investigating “possible collusion” are a win for Republicans, too. As Brendan Nyhan’s been pointing out, most of the mainstream media’s coverage of the IRS scandal happened in its first two weeks. “Is the White House behind this?” was an irresistible story; “Nope, it wasn’t” is a very resistible story. But while everybody moves on, you can put a lot of fear into the bureaucrats.